The year 2020 has been marked by the Covid-19 pandemic, which has altered all economic forecasts and has caused a crisis of enormous dimensions, which some compare to the stock market ‘crash’ of 1929. As in all crisis situations, the Gold has given its best, surpassing its previous historical record dating from 2011 and exceeding, for the first time in its history, $2,000 an ounce. What factors have led to it and how far can it go?
Since the rise in the price of gold began, at the beginning of the year, analysts have looked askance at the historical charts that reflected the maximum historical price reached by the metal, which exceeded $1,900 an ounce in August 2011.
Finally, on July 27, the predictions came true and the spot price of gold surpassed that reached in 2011, exceeding $1,940 an ounce , the highest ever recorded.
A few days later, on August 4, 2020, a new barrier that seemed unattainable was overcome, that of $2,000 an ounce , in an environment marked by the economic slowdown and liquidity injections by central banks.
Record In The London Fixing
For its part, the London Bullion Market Association (LBMA) fixing price broke its own records just a few days later: on August 4 it closed the session at $1,977,900 an ounce , exceeding the previous maximum record, which was 1,895.00 dollars an ounce , on September 5 and 6, 2011.
The following day, the London fixing also soared above $2,000 an ounce, closing at $2,048.15 an ounce . On August 6, the highest figure to date was recorded in the LBMA fixing price: $2,067.15 an ounce .
The milestone was recognized and celebrated by the London Bullion Market Association itself , which, in a press release published in those days, stated that:
“It is the first time in the LBMA’s more than 100-year history that the price of gold in London has exceeded $2,000 an ounce. This new record price is the continuation of the significant rise in gold throughout 2020. The precious metal opened the year on January 2 at $1,520.55 an ounce and has appreciated 33.8% in the 149 days that we have been trading so far, exceeding $1,900 an ounce for the first time on July 24. ”
The previous ‘psychological barriers’ of the gold price had been overcome years before: on March 14, 2008, it exceeded $1,000 an ounce and on April 20, 2011, it exceeded $1,500 . In the 20 years that we have been in the 21st century, the price of gold has appreciated no less than 621% .
As the CEO of the LBMA, Ruth Crowell , pointed out in that communication,
“There is no clearer proof of gold’s role as a store of value than the enthusiasm with which investors around the world have turned to the metal during the unusual social and economic crisis we have experienced in recent months. Once again, gold has shown that it is the preferred safe haven asset in periods of uncertainty and high volatility .
Rise Factors
One of the factors that have contributed the most to this historic rise in gold is undoubtedly international geopolitical and economic instability , especially the enormous damage caused by the Covid-19 pandemic .
This has caused investors to flee en masse from riskier assets, especially stocks, to entrust a large part of their investment portfolios to precious metals and, especially, to gold.
On the other hand, the containment of official interest rates, very close to zero, causes the yield on treasury bonds, an asset that competes directly with gold for investors’ favor, to have plummeted, resulting in positive for the precious metal.
Third, the US dollar has also suffered in recent weeks, not only due to the vicissitudes of politics and the economy in the US, but also due to the implementation of multi-billion dollar bond purchase programs by the Reserve. US Federal, and the circulation of more cash. Measures sink interest rates and, at the same time, giving gold a new boost.
Future Perspectives
Despite the fact that after reaching its maximum records, the price of gold has fallen again, analysts believe that it is only a temporary correction , attributable to the desire of many investors to take profits.
It is true that the price has fallen again, but it is also true that it has not stopped trading above $1,900 an ounce , a level that, for the moment, it does not seem willing to lose.
Far away are the $1,452.20 an ounce that it reached during the correction in March, in full confinement due to the Covid-19 pandemic. Analysts agree that the rescue measures of the central banks , the bond situation , the fall of the dollar and, in general, the nervousness and uncertainty of investors , will continue to play in favor of gold, which could reach new historical records of $2,300 an ounce in 2021.
So far this year, the precious metal has registered a revaluation of more than 30% , much more than other investment assets can say, and most importantly: it has demonstrated its true value as a refuge, in one of the most complicated situations in modern history.
